) second-quarter 2013 adjusted earnings of $1.02 per share beat
the Zacks Consensus Estimate of 91 cents by 12.1%. However, the
adjusted earnings were down 3.8% year over year.
Lower profit generation from the refranchising along with
weaker top line were responsible for such year-over-year decline
Inside the Headline Numbers
Revenues in the reported quarter declined 31.1% year over year
to $158.1 million, owing to a 36.7% fall in franchise and
restaurant revenues and lower traffic at Applebee's. However,
quarterly revenues were in line with the Zacks Consensus
DineEquity operates and franchises restaurants under
Applebee's Neighborhood Grill & Bar and IHOP brands. Amid a
volatile economic condition,
succeeded in posting positive domestic system-wide comparable
sales (comps) of 1.3%, which were also ahead of the year-ago
quarter's comps growth of 0.7%. Comps in the quarter received a
boost from higher average guest check offsetting the decline in
In the second quarter,
's domestic system-wide comps were up 1.9%, driven by the
increase in average guest check as well as traffic. IHOP has
succeeded in posting positive comps as well as traffic growth for
the first time in the past 11 quarters. It proves that the
company's four-pillar strategy which focuses on menu enhancement,
operational improvement, aggressive marketing and better services
has started to pay off.
At the end of the quarter, DineEquity had 3,605 restaurants
under Applebee's and IHOP brands. DineEquity has opened four
Applebee's and 10 IHOP units in the quarter. The company,
however, shut down 23 and six restaurants under Applebee's and
IHOP brands, respectively.
During the second quarter, DineEquity bought back 0.2 million
shares worth $14.5 million.
2013 Outlook Retained
DineEquity has retained its outlook for 2013. The company
expects domestic system-wide comparable-store sales at both
Applebee's and IHOP to be in the range of down 1.5% to up 1.5% in
DineEquity plans to open 40 to 45 franchised restaurants under
Applebee's brand as well as 50 to 60 IHOP franchised restaurants
by year end, most of which will be located in the domestic
market. The company intends to refurbish 70% of its restaurants
by the end of 2013.
DineEquity's year-over-year decline in earnings and revenues
in the past three quarters is a matter of concern. The company
has remodeled its business to franchise-based in order to reduce
the volatility in earnings and increase its cash flow generation.
However, the company's current financial results, especially the
drop in earnings, reflect that it has a long way to go.
On a positive note, with the help of its four-pillar approach,
this Zacks Rank #3 (Hold) company has succeeded in posting
positive comps growth in the second quarter.
Among other restaurateurs,
) missed on earnings but reported in-line revenues, while
Dunkin' Brands Group, Inc.
) beat earnings but missed out on revenues. Another company,
Buffalo Wild Wings Inc.
), was ahead of the estimates on both counts.
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